WallStreetWeather.net Weekly Forecast For Week Of June 1, 2009

Summary Of Last Week’s Influences:Reflation is the buzzword to describe the market’s rise over the last three months and the stampede back into commodities. It is also a perfect description of expansive Jupiter conjoining with inflationary Neptune.

But as Investopedia warns, government intervention to curb falling asset values has never succeeded and ultimately ends up making conditions worse, postponing the recovery. Last Wednesday (the day Jupiter exactly conjoined Neptune), the yield on the 10 year note climbed to 3.732%, its highest level since last November. Bulls attribute higher Treasury yields to investors shifting to higher yielding investments after seeing signs of economic “green shoots.” But the “bond vigilantes” view the nation’s expanding debt combined with the Fed “printing money” as a recipe for disaster. Jupiter represents trust and foreign relations, and foreign governments are not completely confident they can trust the US government to spend its way out of the recession.

Although the yield on the 10 year had retreated to 3.467% by the end of the week, Jupiter and Neptune conjoining in Aquarius indicates that inflation is rising and can spiral out of control quicker than Bernanke can blink. This is because Jupiter expands and Neptune knows no boundaries. Aquarius creates price spikes that move quicker and higher than anticipated. Bernanke wants inflation, but these energies can bring too much inflation, too fast. The only areas of deflation to be found are in certain products and services that consumers do not have to have to survive.

Oil is ruled by Neptune, and Neptune’s energy is particularly pronounced now as the planet turned stationary retrograde* Friday, further reflating the price of crude oil which closed the month of May with its biggest monthly gain in 10 years. (Oil closed at $66.31 Friday). Precious metals and other commodities also continued to gain.

As I described in “Wall Street and the Consumer in Parallel Universes,” Jupiter/Neptune conjoining the USA’s natal Moon is why consumers feel more optimistic about the future. Consumer confidence surveys by the Conference Board and the University of Michigan came in higher than expected, with the biggest gain coming from “future expectations.” It is this feeling of optimism that is causing financial markets to get too far ahead of themselves and speculators to grab up foreclosures despite the fact that underlying fundamentals are still weak. Yet the S&P/Case-Shiller Home Index continues to fall, down 18.7% in March, a record year over year decline. On a BofA Merrill Lynch webcast the other night, Robert Shiller said: “I would be concerned about buying a house right now as it could be worth 20% less next year.”

With Mercury retrograde, Jupiter conjoining Neptune, and Neptune turning retrograde all in the same week, I thought that most of my daily predictions would end up reversed. As promised in last week’s Forecast, here are the grades for last week’s unpublished prognostications (what was incorrect appears in parenthesis).

Tuesday: D (Thought indices would lose momentum, ending only moderately up at the close.)Wednesday: F (Thought market would turn positive in the afternoon.)Thursday: F (Thought would close negative.)Friday: A

Summary Of This Week’s Influences:After being retrograde May 7-30, Mercury slowly begins moving forward again this week, retracing the path it originally traveled on April 22-24. (Mercury will move forward into new territory June 16.)

Mars moves into Taurus this afternoon until July 11. Mars likes to move fast, but Taurus prefers to take it slow and steady. Venus will move into its “home” sign Taurus on Saturday until July 5. Mercury, Venus, and Mars will be in Taurus from June 6-13. Taurus rules banking and material resources. As the first sign of the earth element, Taurus is interested in tangible assets and fundamental values. This is in contrast to the sojourn of Venus and Mars in fiery, fast trading Aries and Jupiter/Neptune in airy Aquarius that are based on possibilities or derivatives of real value.

Because the Jupiter/Neptune alignment is of a longer duration and is particularly influential through July, there remains a strong desire to keep the bear market rally going. Besides, Taurus the bull likes nothing better than asset accumulation. As a fixed sign, Taurus energy tends to be reluctant to make changes, running the risk that profits begin to evaporate.

The Moon in Libra challenging Pluto in Capricorn on Monday, aptly reflects that after obtaining agreement (Libra) from the UAW and a majority of unsecured bondholders, General Motors (GM) will file for Chapter 11 bankruptcy (Pluto) restructuring (Capricorn). President Obama is scheduled to speak about the filing in the morning, while GM CEO Fritz Henderson has planned a midday press conference in Manhattan to discuss the filing. (The Moon enters Libra at 11:17 AM.) Meanwhile Treasury Secretary Geithner, one of the members of the Auto Task Force, will be in China urging the Chinese government to transform their nation into a domestic consumer driven economy since US consumers are tapped out.

Fed Chairman Bernanke will testify before the House Budget Committee on Wednesday at 10:00 AM on “Challenges Facing the Economy.” As a follow up to my post on “Bernanke and the Fed’s Bogus Transparency,” the GAO is making preparations to audit the Fed over its handling of American International Group (AIG). On May 21, AIG Chairman & CEO Ed Liddy announced he would resign as soon as a replacement is found. Throughout his tenure, Liddy has emphasized that Federal Reserve officials were involved in the decision making process as they occupied AIG’s offices and attended Board meetings.

The Sun in Gemini challenges Saturn in Virgo on Friday, requiring mental discipline to sort through all the information to ascertain what’s relevant to efficiently and cost effectively tackle the job. Saturn represents contraction, and Virgo the workforce. The May employment report is released today. Economists anticipate a loss of around 530,000 jobs and a 9.2% unemployment rate. The market’s reaction to the report could be better than expected, perhaps due to revisions or employers who cut back hours instead of laying off in the hope that business picks up later this year. The President or government leader and/or a prominent CEO might come out with more of the “we’re about at the bottom/worst is almost over” remarks to boost investor confidence.

Monday, June 1, 2009Negative trend bias.

Tuesday, June 2, 2009Negative trend bias; improving conditions in the late morning. Could weaken again and regain traction in the final hour.

Wednesday, June 3, 2009Indecisively swings from negative to choppy/mixed conditions improving to positive in afternoon.

Thursday, June 4, 2009Positive.

Friday, June 5, 2009Choppy/mixed to mostly positive trend bias, but could deteriorate into the close.

*Planets do not really move backwards but appear to from Earth’s vantage point.